Ariel Sharon's eldest son, Omri, is facing a prison term and expulsion from parliament after pleading guilty yesterday to laundering illegal funds for his father's election campaign and of lying to investigators.

In a move seen as designed to protect Israel's prime minister, Omri Sharon made a deal with prosecutors in which he admitted falsifying the financial records of shell companies set up to handle hundreds of thousands of pounds in illegal funds, breaching campaign financing laws and perjury. In return, the prosecution dropped charges of fraud and breach of trust.

The state said it would seek a prison sentence for Omri Sharon, 41. He faces up to five years in jail but the sentence is expected to be lighter. His lawyers said the campaign laws were "too difficult to uphold" and therefore he should receive only a fine.

He will also be expelled from parliament, where he is an MP for his father's Likud party, if he does not resign first.

The guilty plea will strengthen the widely held perception, reflected in opinion polls, that the Sharon family, along with many other politicians, is corrupt but it is unlikely to affect the prime minister's electoral support. Most Israelis vote mainly on security and confidence in Mr Sharon remains high on that issue.

The prime minister has denied knowledge of the illegal funds used to his benefit but there is speculation that Omri took responsibility to save his father political embarrassment. The newspaper Ma'ariv, reported that he decided not to fight the charges against him because he wanted to avoid embarrassing revelations in court that could damage his father and his party in the run-up to a general election expected in spring.

He admitted laundering more than £750,000 through shell companies to illegally fund his father's successful campaign for the leadership of Likud six years ago. The charges against him said that Omri Sharon told companies that wished to donate money in breach of party funding laws to issue receipts for work or services they had not received.

Campaign laws permit candidates for political party primaries to collect about £100,000 for each campaign. The police are also investigating allegations that when the illegal campaign funds were discovered and the state comptroller ordered that they be repaid, a second slush fund was set up to do so. The fraud squad is probing allegations that Mr Sharon's younger son, Gilad, received £865,000 from Cyril Kern, a British-born businessman friend of the prime minister who lives in South Africa. That money was allegedly used to repay the original illegal campaign funds. There is no suggestion that Mr Kern knew how the money was to be used. Austria is investigating Gilad because the money from Mr Kern was transferred via a bank in Vienna.